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Business Loan issuers in India

Business Loan Interest Rates

Various financial institutions offer business loans at low-interest rates. Business loan interest rates offered by Banks or NBFCs start at 16% p.a. for loan amounts up to Rs. 2 crores, and with a maximum repayment tenure of up to 5 years (It can be extended as per the business requirements). Apply For A Business Loan on CreditMantri and get affordable business loan interest rates. You can compare from a pool of lenders and choose the one offering the best rate of interest.

Business Loan Interest Rates Offered by Top Financial Institutions - A Comparison


Interest Rates

Tata Capital

12% p.a.

NeoGrowth Finance

19% p.a. to 24% p.a.


2% per month onwards

Axis Bank

14.95% - 19.20% p.a.


12% p.a. to 18% p.a.

Kotak Mahindra Bank

16% p.a. to 26% p.a.

IDFC First Bank

10.50% p.a. onwards


10% p.a. - 22.50% p.a.

Flexi loans

1% per month onwards


1.50% per month onwards


12% to 27% p.a.


16.00% - 22.00%

Bank of Baroda

Between 7.25% to 13.50%

Federal Bank

11.1% to 16.35%

Yes Bank

13.25% to 19.99%

How Can You Get Low Interest Rates on Your Business Loans?

  • Having a good credit score: If you or your business have a good credit score, you can get low interest rates on your business loan. A good credit history reflects your financial discipline and timely repayments of loans and credit card bills. This will lower your credit risk in the eyes of a prospective lender that you approach. So, the lender will charge a lower interest rate on the loan that you take.
  • The cash flows: If the cash flows of your business are good, then the lender will charge a lower interest rate.
  • Have a good and detailed business plan: Having a sound business plan will help you in getting a lower interest rate on your loan.
  • Apply for a long-term business loan instead of a short-term business loan.
  • Establish a good relationship with the bank: Open an account in the bank and repay all your loan EMIs on time.
  • Avail of a business loan only from a well-known and experienced financial institution.
  • Take a secured loan and pledge assets other than your business assets as collateral. Then, the interest charged will be lower.
  • Use online tools and calculators to compute the interest rate and ensure that it is affordable.
  • Do a Business loan balance transfer: Balance transfer involves transferring your current business loan from one bank to another at a comparatively lower interest rate or for other benefits. The main reason for doing balance transfers is to reduce EMIs and choose a lower interest rate to pay the loan amount due.

Factors that Affect Business Loan Interest Rates

  • Nature of Business: The business loan is categorized depending on the nature of the business namely non-priority sector and priority sector. So, the nature of the business affects the interest rates on the business loan.
  • Years of Existence of the Business: Lenders usually levy interest rates based on the sustenance of the business. So, the longer your business has been in existence, the higher your chances of obtaining lower interest rates. However, for a business loan to be sanctioned, the business should have been operational at least for 1 year.
  • Business Turnover: Lenders analyze the profitability of your business before sanctioning a business loan. The more profitable your business is, the lender will have greater trust in your repayment capacity. Thus, a profitable business has a greater chance of getting lower interest rates than one that is constantly incurring losses.
  • Credit Score: Your credit score reflects how well you've paid back loans in the past, and it affects the business loan interest rate you'll get. If you have a good score, you're more likely to get approved for a business loan with a lower interest rate. A credit score of 700 and more is considered good.
  • Collateral/Security: When you apply for a loan, the lender may ask for collateral as security. The more valuable the collateral, the lower the business loan interest rate. Real estate, equipment, machinery, deposits, and home equity are all collateral. However, there are also unsecured business loans available that don't require any collateral to be submitted to the bank or NBFC.
  • Type of Lender: Business loan interest rates offered by public and private sector banks are lower than those offered by NBFCs, small finance banks (SFBs), Micro Finance Institutions (MFIs), or other financial institutions.

What Are The Two Types of Business Loan Interest Rates?

There are 2 types of interest rates for business loans

a) Diminishing Rate of interest – The interest rate is determined based on the amount of principal outstanding at the end of a certain period. When computing interest, the next computation is based on the outstanding principal balance and not the starting principal amount.

b) Flat Rate of interest – A Flat Interest Rate means that the interest rate stays fixed through the loan tenure. The interest here is computed for the whole loan amount at the start of the loan tenure.

FAQs Of Business Loan Interest

1. How to calculate Interest/EMI on a business loan?

Once your loan specifics are finalized, there are loan EMI calculators available online which can be used to know your Interest and Principal breakdown each month and also keep track of the amount paid and the amount pending which can be useful when planning to repay the loan.

2. Can I get a 50 lakhs loan for business?

A business loan is called unsecured financing, and you can get one without providing any collateral. You can get a 50 lakhs loan for business by applying on CreditMantri and fulfilling all the required eligibility criteria. You can compare between lenders and choose the one most suitable for you.

3. What are the fees for early loan repayment on business loans?

Early loan repayment charges vary across banks. There may be multiple restrictions based on the bank from which a customer borrows. But, usually the rate of interest lies between 4% and 5% of the outstanding loan amount.

4. Are business loan interest rates negotiable?

Yes, business loan interest rates are negotiable. If the current interest rate on your loan is high, then you must consider lowering the rate by negotiating with the lender. Lenders may negotiate based on your repayment history.

5. Is it possible to secure a lower interest rate by refinancing my business loan?

Yes, you can refinance your current business loan to get a lower interest rate and also flexible repayment terms and conditions.

6 . Is there a penalty for prepaying a business loan to lower interest costs?

There is a penalty for prepayment of a loan depending on the lender. Some lenders impose penalties while others provide the flexibility to prepay without any charges.

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